With reference to the international trade of India at present, which of the following statements is/are correct?
- 1.India's merchandise exports are less than its merchandise imports.
- 2.India's imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
- 3.India's exports of services are more than its imports of services.
- 4.India suffers from an overall trade/current account deficit.
Select the correct answer using the code given below:
Why UPSC dropped it · explanation
UPSC dropped this question from evaluation in its final answer key.
UPSC dropped this question from evaluation in its final answer key. The facts behind it: India normally imports more goods than it exports (a merchandise trade deficit), earns more from services than it pays for them (a services surplus led by software), and usually runs a current account deficit overall, though that turned into a surplus in the pandemic period of 2020.
- ✓ 1. India has a long-standing merchandise trade deficit: goods imports exceed goods exports (Economic Survey 2019-20 puts it at about 6 per cent of GDP in 2014-19 and the largest component of the current account deficit).
- • 2. UPSC dropped this question; we could not confirm this claim from an official source, so we do not explain it here.
- ✓ 3. India runs a net services surplus, which Economic Survey 2019-20 says has been significantly financing the merchandise trade deficit; software services make up the bulk of service exports (around 40-45 per cent).
- • 4. A current account deficit is India's usual position, but the current account moved to a small surplus in Q4 2019-20 and a larger one in H1 2020-21, so 'at present' was open to dispute in 2020.
Remember · India: goods trade in deficit, services trade in surplus, current account normally in deficit but in surplus during the 2020 pandemic slump.
Sources
- Ministry of Finance, Economic Survey 2019-20, Vol. 2, Ch 3 (External Sector): merchandise trade deficit (Internet Archive copy) ↗ “Merchandise trade deficit is the largest component of India’s current account deficit … The surplus on net services has been significantly financing the merchandise trade deficit. … Software services constitute the bulk of it at around 40-45 per cent, followed by business services at about 18-20 per cent … dependence on net FPI to finance the CAD was less in 2014-19 at 17.1 per cent as compared to 45.6 per cent in 2009-14”
- RBI, Financial Stability Report, January 2021 ↗ “With the weakening of domestic demand in H1:2020-21, the current account surplus increased to 3.1 per cent of GDP (0.1 per cent in Q4:2019-20).”
Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). ·